Correlation Between SPDR MSCI and FlexShares Morningstar
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and FlexShares Morningstar at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SPDR MSCI and FlexShares Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI EAFE and FlexShares Morningstar Global, you can compare the effects of market volatilities on SPDR MSCI and FlexShares Morningstar and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SPDR MSCI with a short position of FlexShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and FlexShares Morningstar.
Diversification Opportunities for SPDR MSCI and FlexShares Morningstar
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPDR and FlexShares is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI EAFE and FlexShares Morningstar Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar and SPDR MSCI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SPDR MSCI EAFE are associated (or correlated) with FlexShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Morningstar has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and FlexShares Morningstar go up and down completely randomly.
Pair Corralation between SPDR MSCI and FlexShares Morningstar
Given the investment horizon of 90 days SPDR MSCI EAFE is expected to generate 0.88 times more return on investment than FlexShares Morningstar. However, SPDR MSCI EAFE is 1.14 times less risky than FlexShares Morningstar. It trades about 0.0 of its potential returns per unit of risk. FlexShares Morningstar Global is currently generating about -0.03 per unit of risk. If you would invest 7,637 in SPDR MSCI EAFE on September 1, 2024 and sell it today you would lose (23.00) from holding SPDR MSCI EAFE or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
SPDR MSCI EAFE vs. FlexShares Morningstar Global
Performance |
| Timeline |
| SPDR MSCI EAFE |
| FlexShares Morningstar |
SPDR MSCI and FlexShares Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and FlexShares Morningstar
The main advantage of trading using opposite SPDR MSCI and FlexShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, FlexShares Morningstar can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FlexShares Morningstar will offset losses from the drop in FlexShares Morningstar's long position.| SPDR MSCI vs. iShares ESG Aggregate | SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. Aquagold International | SPDR MSCI vs. Thrivent High Yield |
| FlexShares Morningstar vs. SPDR SP Global | FlexShares Morningstar vs. FlexShares STOXX Global | FlexShares Morningstar vs. SPDR SP North | FlexShares Morningstar vs. FlexShares iBoxx 3 Year |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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